Human immunodeficiency virus (HIV)-infected individuals exhibit a variety of hematopoietic dysfunctions. The SCID-hu mouse (severe combined immunodeficient mouse transplanted with human fetal thymus and liver tissues) can be used to model the loss of human hematopoietic precursor cell function following HIV infection and has a distinct advantage in that data can be obtained in the absence of confounding factors often seen in infected humans. In this study, we establish that HIV type 1 (HIV-1) bearing a reporter gene inserted into the viral vpr gene is highly aggressive in depleting human myeloid and erythroid colony-forming precursor activity in vivo. Human CD34(+) progenitor cells can be efficiently recovered from infected implants yet do not express the viral reporter gene, despite severe functional defects. Our results indicate that HIV-1 infection alone leads to hematopoietic inhibition in vivo; however, this effect is due to indirect mechanisms rather than to direct infection of CD34(+) cells in vivo.